Close Close

Regulation and Compliance > Federal Regulation > SEC

Court Issues Arrest Warrant for Insider Trading Defendant: Enforcement

Your article was successfully shared with the contacts you provided.

A federal court in Newark, New Jersey issued an arrest warrant for a defendant charged with insider trading and found him in contempt of two previously issued orders, according to a litigation release from the Securities and Exchange Commission.

U.S. District Judge Jose L. Linares found that Yu-Cheng Lin, also known as Believe Lin, had violated two prior orders by dissipating assets and refusing to repatriate funds. The judge imposed a $1,000-per-day sanction and ordered the clerk to issue an arrest warrant for Lin. The clerk issued the arrest warrant on May 25.

In an emergency action filed under seal on Feb. 9, and unsealed on Feb. 13, the SEC alleged that on May 5, Aug. 4 and Nov. 3, 2016, Lin traded on material inside information ahead of quarterly earnings announcements by Ubiquiti Networks Inc., a California-headquartered company where Lin had worked from approximately March 2011 until June 2015.

Lin allegedly did so by purchasing Ubiquiti common stock, call options and contracts-for-difference in brokerage accounts located in the United States and overseas. On April 3, the SEC filed an amended complaint alleging that Lin directed or controlled trading by a 34-year-old woman residing in Taipei, Taiwan who was a close associate of Lin and traded Ubiquiti securities in 2014 while Lin was working for the company.

The SEC’s amended complaint seeks permanent injunctions, disgorgement of ill-gotten gains together with prejudgment interest, and civil monetary penalties.

The court granted the SEC’s motion for a temporary restraining order on Feb. 9 and issued a preliminary injunction on Feb. 24, each of which imposed an asset freeze and ordered that Lin repatriate money obtained directly or indirectly from the illegal trading and deposit that money into the registry of the court.

SEC Orders Promoter of TelexFree Scheme to Pay Over $1.8 Million

The federal court in Boston has ordered Sanderley Rodrigues de Vasconcelos of Davenport, Florida, a defendant in SEC v. TelexFree Inc., et al., to pay more than $1.8 million, according to an SEC announcement.

The court’s order holds Rodrigues liable for over $1.83 million, including approximately $1.7 million in disgorgement and prejudgment interest and a $150,000 civil penalty.

In April 2014, the SEC charged Massachusetts-based TelexFree Inc. and TelexFree LLC, plus four company officers and four promoters of TelexFree – including Rodrigues – with perpetrating an international pyramid scheme targeting Latino communities in the U.S.

In settling the SEC’s charges, Rodrigues admitted that he was a promoter of TelexFree, appearing at TelexFree-sponsored public events and other gatherings at hotels and resorts. He further admitted that he appeared in promotional videos that were posted on YouTube and posted at least one video himself.

SEC Obtains Final Judgments Against Connecticut Advisor, CEO for Failure to Disclose Fees

The SEC obtained final judgments by consent against Connecticut-based investment advisor Momentum Investment Partners LLC (doing business as Avatar Investment Management), and its CEO, Ronald J. Fernandes, for failing to disclose to some of Avatar’s advisory clients certain fees they were being charged.

Among other things, the judgments order the defendants to pay a total of over $230,000.

On May 31, 2016, the SEC filed a complaint in federal court in Hartford, Connecticut, alleging that Avatar and Fernandes failed to disclose material conflicts of interest in connection with investments Avatar made in new mutual funds that it created and managed. According to the complaint, Avatar and Fernandes failed to disclose that moving clients’ assets into these newly created mutual funds would increase the clients’ total advisory fees paid to Avatar without changing the clients’ investment strategy.

The complaint alleges that between May 2013 and March 2014, Avatar’s clients paid almost $111,000 in additional fees, including approximately $61,000 that was ultimately paid to Avatar, for no additional services.

SEC Charges Former CEO of Penny Stock Company With Fraud

The SEC filed fraud charges against Adesh Kumar Tyagi, the former CEO, sole director and majority shareholder of Systems America Inc., subsequently renamed Cloudeeva Inc.

The SEC’s complaint, filed in the U.S. District Court for the Northern District of California on May 31, alleges that Tyagi falsely claimed in press releases he issued between July 2010 and September 2011 that the company had hundreds of customers and supported customer operations in nearly 20 countries when, in fact, the company had only two main clients in 2010 and did not support operations in any foreign countries in 2010 and 2011.

The SEC’s complaint seeks permanent injunctions; an injunction prohibiting Tyagi from participating in transactions of any security of an entity of which he is an officer, director, owner, significant shareholder or control person; disgorgement of ill-gotten gains plus prejudgment interest; penalties; and officer-and-director and penny stock bars.

Former Nomura Trader Fined, Barred in CMBS Case

A final consent judgment against defendant Kee Chan ordered him to pay $51,965 in disgorgement plus $11,758 in prejudgment interest and a $150,000 civil monetary penalty, according to an SEC announcement. The judement also enjoins him from violating antifraud provisions of the federal securities laws.

The SEC also issued an administrative order barring Chan from the securities industry with a right to reapply after three years. Chan consented to the issuance of the final judgment and administrative order without admitting or denying the allegations in the complaint. The SEC’s separate case against defendant James Im continues.

The SEC charged Im and Chan, who ran the commercial mortgage-backed securities (CMBS) desk at Nomura Securities International Inc., with deliberately lying to customers in order to inflate the profits of the CMBS desk and line their own pockets as a result. 

—Related on ThinkAdvisor:


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.